5 Earnings Plays That Could Squeeze the Shorts

Short-sellers hate being caught short a stock that reports a blowout quarter. When this happens, we often see a tradable short squeeze develop as the bears rush to cover their positions. Even the best short-sellers know, it's never a great idea to stay short once a bullish earnings report sparks a big short-covering rally.

This is why I scan the market for heavily shorted stocks that are about to report earnings. You only need to find a few of these stocks every week to help enhance your portfolio returns.

With that in mind, let's take a look at several stocks that could experience big short squeezes when they report earnings this week.

GameStop

My first earnings short-squeeze trading opportunity is omnichannel video game retailer GameStop (GME) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect GameStop to report revenue of $3.1 billion on earnings of $2.29 per share.

The current short interest as a percentage of the float for GameStop is very high at 24.1%. That means that out of the 99.65 million shares in the tradable float, 24.05 million shares are sold short by the bears.

I would wait until after GameStop reports, and then look for long-biased trades if this stock manages to break out above some near-term resistance levels at $25.30 to its 200-day at $25.56 and then above more resistance at $26.27 to $27.37 with volume that hits near or above 2.60 million shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $31.29 to its 52-week high of $33.72 a share.

Oxford Industries

Another potential earnings short-squeeze trade idea is apparel player Oxford Industries (OXM) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Oxford Industries to report revenue of $267.28 million on earnings of 92 cents per share.

The current short interest as a percentage of the float for Oxford Industries is notable at 8.2%. That means that out of the 14.99 million shares in the tradable float, 1.23 million shares are sold short by the bears.

I would wait until after Oxford Industries reports, and then look for long-biased trades if this stock manages to break out above its 20-day at $55.01 and then above some key near-term resistance levels at $57.26 to $57.80 with volume that hits near or above 165,608 shares. If that breakout fires off post-earnings, then this stock will set up to re-test or possibly take out its next key resistance levels at its 200-day of $60.92 to $62, or even $63 to $64 a share.

Actuant

Another potential earnings short-squeeze candidate is industrial goods player Actuant (ATU) , which is set to release numbers on Wednesday before the market open. Wall Street analysts, on average, expect Actuant to report revenue of $250.41 million on earnings of 12 cents per share.

The current short interest as a percentage of the float for Actuant stands at 8%. That means that out of the 57.73 million shares in the tradable float, 4.64 million shares are sold short by the bears.

I would wait until after Actuant reports, and then look for long-biased trades if this stock manages to break out above some key resistance levels at $29.17 to its 52-week high of $29.80 with volume that hits near or above 463,601 shares. If that breakout materializes post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $32.20 to $34.30, or even $35 a share.

Micron Technology

Another earnings short-squeeze prospect is semiconductor player Micron Technology (MU) , which is set to release numbers on Thursday after the market close. Wall Street analysts, on average, expect Micron Technology to report revenue of $4.64 billion on earnings of 84 cents per share.

The current short interest as a percentage of the float for Micron Technology sits at 4.4%. That means that out of 1.04 billion shares in the tradable float, 45.86 million shares are sold short by the bear.

I would wait until after Micron Technology reports, and then look for long-biased trades if this stock manages to break out above its 52-week high of $26.61 and then above some key past resistance at $29.80 with volume that hits near or above 25.54 million shares. If that breakout hits post-earnings, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $32 to $33, or even $36 to $36.50 a share.

REX American Resources

(REX)

My final earnings short-squeeze play is ethanol player REX American Resources (REX) , which is set to release numbers on Friday before the market opens. Wall Street analysts, on average, expect REX American Resources to report revenue of $121.30 million.

The current short interest as a percentage of the float for REX American Resources is pretty high at 12.2%. That means that out of the 5.20 million shares in the tradable float, 637,000 shares are sold short by the bears.

I would wait until after REX American Resources reports, and then look for long-biased trades if this stock manages to break out above some key resistance levels at its 50-day of $84.19 and then above $86.68 to $87.54 with volume that hits near or above 51,661 shares. If that breakout triggers post-earnings, then this stock will set up to re-test or possibly take out its next major resistance levels at $91 to $93, or even $95 to $96 a share.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

More from Stocks

Stocks Trade Lower as Amazon Rises, Apple and P&G Slump

Stocks Trade Lower as Amazon Rises, Apple and P&G Slump

How Will Tesla Get the $25 Billion It Needs to Make Elon Musk's Dreams Reality?

How Will Tesla Get the $25 Billion It Needs to Make Elon Musk's Dreams Reality?

Either Respect Amazon When Investing or Risk Getting Run Over

Either Respect Amazon When Investing or Risk Getting Run Over

Chart: Amazon's Stock Easily Could Pop Another 18% by Summer

Chart: Amazon's Stock Easily Could Pop Another 18% by Summer

How You Can Make Money Off Amazon's Invincibility

How You Can Make Money Off Amazon's Invincibility